Correlation Between Hunan Oil and Guanghui Energy

Can any of the company-specific risk be diversified away by investing in both Hunan Oil and Guanghui Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hunan Oil and Guanghui Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan Oil Pump and Guanghui Energy Co, you can compare the effects of market volatilities on Hunan Oil and Guanghui Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hunan Oil with a short position of Guanghui Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Oil and Guanghui Energy.

Diversification Opportunities for Hunan Oil and Guanghui Energy

-0.13

Correlation Coefficient

Hunan Oil  Guanghui Energy

Good diversification

The 3 months correlation between Hunan and Guanghui is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Oil Pump and Guanghui Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guanghui Energy and Hunan Oil is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hunan Oil Pump are associated (or correlated) with Guanghui Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guanghui Energy has no effect on the direction of Hunan Oil i.e., Hunan Oil and Guanghui Energy go up and down completely randomly.

Pair Corralation between Hunan Oil and Guanghui Energy

Assuming the 90 days trading horizon Hunan Oil Pump is expected to generate 3.29 times more return on investment than Guanghui Energy. However, Hunan Oil is 3.29 times more volatile than Guanghui Energy Co. It trades about -0.05 of its potential returns per unit of risk. Guanghui Energy Co is currently generating about -0.4 per unit of risk. If you would invest  2,229  in Hunan Oil Pump on October 6, 2024 and sell it today you would lose (240.00) from holding Hunan Oil Pump or give up 10.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hunan Oil Pump  vs.  Guanghui Energy Co

Hunan Oil Pump

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Oil Pump are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Oil may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guanghui Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guanghui Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hunan Oil and Guanghui Energy

The main advantage of trading using opposite Hunan Oil and Guanghui Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hunan Oil position performs unexpectedly, Guanghui Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Guanghui Energy will offset losses from the drop in Guanghui Energy's long position.

The idea behind Hunan Oil Pump and Guanghui Energy Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.